Good Morning
In overnight trading, global investors found new reason to speculate that an economic bottom is nearing following the FOMC's statement that "the pace of contraction appears to be somewhat slower"....in Asia the NIKKEI moved up 3.94%, the TOPIX was 3.18% higher, the HANG SENG +3.77%, and the SHANGHAI a measily 0.38% greener. The cheery sentiment also spread through Europe as major indices are up over 2% at the moment. US stock futures indicate that we too will trade higher at the open.
The US Treasury market remains in a defensive posture due to the lack of specific bond friendly Fed verbiage (and their equity friendly statements). The yield curve continued its climb steeper overnight as the 10yr TSY yield rose to 3.14% and 2s vs. 10s reached a 6 month high of 218bps. Later this morning the Federal Reserve will step in and make some open market purchases of Treasury debt. The will buy up maturities from 2019 to 2026. This will help lower interest rate volatility and offset some of the recent bearish yield curve steepening (selling into strength)...which will foster lower consumer borrowing costs across the curve.
The defensive stance on TSY is putting selling pressure on "rate sheet influential" MBS coupons this morning. The cheapening up of MBS is welcomed though....as FN 4.0s head back under par, non-Federal Reserve accounts (mostly banks, insurance companies, and pension funds) will grow increasingly enthusiastic about meddling in production MBS coupons. This implies more demand side support for mortgages...yay for rate sheets!
Following yesterday's afternoon MBS selloff many investors repriced for the worse. This upsets many but it should be noted that primary/secondary spreads tightened up as rate sheets were not hit to the same extent that MBS sold off. I still show several lenders pricing par 30 year fixed mortgages near 4.50% (for qualified borrowers).
Remember: lenders are not necessarily basing their pricing strategies on current MBS market bids. They locked in their loans when MBS prices were at the topside of the range...so they have room to cushion pricing from current MBS market weakness (price depreciation not spreads bc they are not weak at all)
Since 5pm "Going Out" Marks...
FN30________________________________
FN 4.0 -------->>>> -0-03 to 100-00 from 100-03
FN 4.5 -------->>>> -0-04 to 101-24 from 101-28
FN 5.0 -------->>>> -0-03 to 102-27 from 102-30
FN 5.5 -------->>>> -0-01 to 103-19 from 103-20
FN 6.0 -------->>>> -0-01 to 104-18 from 104-19
GN30________________________________
GN 4.0 -------->>>> -0-02 to 100-05 from 100-07
GN 4.5 -------->>>> -0-04 to 102-00 from 102-04
GN 5.0 -------->>>> -0-01 to 103-16 from 103-17
GN 5.5 -------->>>> -0-01 to 103-28 from 103-29
GN 6.0 -------->>>> -0-01 to 104-13 from 104-13
EFFECTIVE FED FUNDS: +0.02 to 0.18 from 0.16
LIBOR FIXINGS
O/N LIBOR: +0.0037 to 0.2313 from 0.2275
1 MONTH: -0.0069 to 0.4112 from 0.4181
3 MONTH: -0.0113 to
1.0163 from 1.0275
6 MONTH: -0.0137 to 1.5650 from 1.5788
1 YEAR: -0.0106 to 1.8769 from 1.8875
It appears that Chrysler will be unable to renegotiate their DEBTS with bondholders. So markets will most likely be digesting a Chapter 11 BK of CHRYSLER today....
MBS Market Alerts
